How to Start a CNC Shop

A computer numerical control (CNC) machine is a computerized cutting tool that can make complex shapes and designs from wood, metal, plastics, or even glass. If you know how to operate a CNC machine, whether it’s a CNC router or a CNC mill, you could start a CNC shop to make products or parts for other local businesses. The CNC machine market is growing rapidly, as the applications that a CNC can be used are expanding.

But before you get started, you need to understand the business. Luckily, this step-by-step guide has all the information you need to start a successful CNC shop. 

Step 1: Decide if the Business Is Right for You

Pros and cons

CNC shop industry trends

Industry size and growth

• Industry size and past growth – The global CNC machine industry was worth $96.4 billion in 2021.((https://www.precedenceresearch.com/computer-numerical-control-machine-market)) 
• Growth forecast – The global CNC machine industry is projected to grow to $153.8 billion by 2030. 

Trends and challenges

Trends

• Advancements in technology have increased the efficiency of CNC machine processes and decreased the time it takes to complete projects.
• Many CNC shops are focusing on producing parts for up and coming industries, such as electric vehicles.

Challenges

• Increasing energy costs are having a negative impact on the profit margins of CNC shops.
• Economic conditions may decrease the budgets of CNC shop customers. 

Demand hotspots

• Most popular states – The most popular states for machinists are New Hampshire, Oregon, and Connecticut.((https://www.zippia.com/machinist-jobs/best-states/))
• Least popular states – The least popular states for machinists are Florida, Oklahoma, and South Carolina.

What kind of people work in CNC shops? 

• Gender –  7% of machinists are female, while 93% are male.((https://www.zippia.com/machinist-jobs/demographics/))
• Average level of education – The average machinist is high school educated.
• Average age – The average machinist in the US is 47.6 years old.

How much does it cost to start a CNC shop business?

Startup costs for a CNC shop range from $50,000 to $90,000. Costs include the shop space rental and the equipment.

You’ll need a handful of items to successfully launch your CNC shop business, including: 

• CNC lathe
• CNC router
• CNC milling machine

Most CNC businesses also have other tools such as welders and a variety of manual machines and tools.

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$100 - $500	$300
Business licenses and permits	$100 - $300	$200
Insurance	$100-$500	$300
Website	$500 - $1,000	$750
Shop space rental	$3,000 - $5,000	$4,000
Equipment	$40,000 - $60,000	$50,000
Operating budget	$10,000 - $20,000	$15,000
Sales and marketing budget	$500 - $1,000	$750
Total	$54,300 - $88,300	$71,300

How much can you earn from a CNC shop business?

Generally, you’ll charge customers a setup fee of around $150, a marked up price for raw materials, and an hourly rate for the job which should be between $100 to $150. Job prices will obviously vary greatly, but these calculations will assume an average job price of $5,000. Your profit margin should be about 20%. 

In your first year or two, you might do one project per week, bringing in $260,000 in revenue. This would mean $52,000 in profit, assuming that 20% margin. 

As you gain traction, sales could climb to five projects per week. With annual revenue of $1,300,000, you’d make a tidy profit of $260,000.

What barriers to entry are there?

There are a few barriers to entry for a CNC shop. Your biggest challenges will be:

• Having the required skills
• Funding the startup costs

Step 2: Hone Your Idea

Now that you know what’s involved in starting a CNC shop, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research could give you the upper hand even if you’ve got the perfect product. Conducting robust market research is crucial, as it will help you better understand your customers, your competitors, and the broader business landscape.

Why? Identify an opportunity

Research CNC shops in your area to examine their services, price points, and customer reviews.

• Make a list of CNC shops that offer similar services. 
• Review your competitors’ services – their features, pricing, and quality – and marketing strategies
• Check out their online reviews and ratings on Google, Yelp, and Facebook to get an idea of what their customers like and dislike.
• Identify your competitors’ strengths and weaknesses. 

This should identify areas where you can strengthen your business and gain a competitive edge to make better business decisions.

You’re looking for a market gap to fill. For instance, maybe the local market is missing a CNC milling shop or a CNC shop that specializes in CNC machined parts for cars.

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your products and services

The list of items you can make with a CNC machine is endless. You can decide to specialize in a certain type of item or make a variety. Consider the types of businesses in your area that might be customers. That might give you an idea of what to specialize in.

Explore a variety of CNC router business ideas that could inspire your entrepreneurial journey.

How much should you charge for CNC services?

Check what other CNC shops in your area charge and make your prices competitive. You’ll also want to consider your costs for each project when giving estimates.

Once you know your costs, use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will be business owners in your area. You can connect with them on LinkedIn or call on them directly.

Where? Choose a CNC shop location

You’ll need to rent out a shop space. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Step 3: Brainstorm a CNC Shop Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “CNC shop” or “CNC machine shop”, boosts SEO
• Name should allow for expansion, for ex: “Universal CNC Creations” and “Infinite Machining Solutions” over “PrecisionAutoParts CNC” and “AeroCraft CNC”
• Avoid location-based names that might hinder future expansion
• Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead and reserve your business name with your state, start the trademark registration process, and complete your domain registration and social media account creation. 

Your business name is one of the key differentiators that sets your business apart. Once you pick a name, reserve it and start with the branding, it’s hard to switch to a new name. So be sure to carefully consider your choice before moving forward. 

Step 4: Create a CNC Shop Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

• Executive Summary: A brief overview outlining the CNC shop’s focus on precision machining services for various industries.
• Business Overview: Introduction to your CNC shop specializing in computer numerical control (CNC) machining services for custom parts and components.
• Product and Services: Description of services including CNC milling, turning, and precision machining for metals, plastics, and other materials.
• Market Analysis: Analysis of the demand for CNC machining in sectors like automotive, aerospace, and manufacturing, and the shop’s potential market share.
• Competitive Analysis: Evaluation of local and regional CNC shops, their service offerings, pricing, and client base.
• Sales and Marketing: Strategy for attracting clients through industry networking, digital marketing, and showcasing project portfolios.
• Management Team: Information about the team’s experience in CNC machining, business management, and industry knowledge.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to CNC shops. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your CNC shop will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts. Here’s how to form an LLC.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation. Read how to start a corporation here.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have. 

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Venture capital: Venture capital investors take an ownership stake in exchange for funds, so keep in mind that you’d be sacrificing some control over your business. This is generally only available for businesses with high growth potential.
• Angel investors: Reach out to your entire network in search of people interested in investing in early-stage startups in exchange for a stake. Established angel investors are always looking for good opportunities. 
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a CNC shop business. 

Step 8: Apply for CNC Shop Business Licenses and Permits

Starting a CNC shop business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your CNC shop business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.  

You may want to use industry-specific software, such as Modern Machine Shop or Production Machining, to manage your costing, estimates, and workflows. 

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Create a website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

Your customers are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. 

Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Get Quote Now”. This can sharply increase purchases. 

Online Marketing

Here are some powerful digital marketing strategies for a CNC shop: 

• Social media is a great tool for promoting your business because you can create engaging posts that advertise your products:
  • Facebook: Great platform for paid advertising, allows you to target specific demographics, like men under age 50 in the Cleveland area. 
  • Instagram: Same benefits as Facebook but with different target audiences. It’s a very good platform for creative businesses. 
  • TikTok: This social media platform has over 1 billion monthly active users and it is used primarily by a younger demographic.
  • LinkedIn: the most effective place for B2B marketers.
• Google and Yelp: For businesses that rely on local clientele, getting listed on Yelp and Google My Business can be crucial to generating awareness and customers.
• Email marketing/newsletter – Send regular emails to customers and prospects. Make them personal. 
• Start a blog – Start a blog and post regularly. Change up your content and share on multiple sites.
• Paid ads on social media – Choose sites that will reach your target market and do targeted ads.
• Pay–per-click marketing – Use Google AdWords to perform better in searches. Research your keywords first.
• Do a webinar – Share your CNC expertise online with a video seminar.

Take advantage of your website, social media presence and real-life activities to increase awareness of your offerings and build your brand. 

Traditional Marketing

Traditional marketing is any form of marketing that uses offline media to reach an audience. Some options that might work for a CNC shop business include:

• Cold calling – Close more sales with less stress.
• Sponsor events – You can pay to be a sponsor at events that are relevant to your target market.
• Seek out referrals – Offer incentives to generate customer referrals to new clients. 
• Testimonials – Share customer testimonials about how your CNC shop helped them.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your CNC shop meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your CNC shop business could be:

• Precision machining excellence delivered with every project at our CNC machine shop
• Unleash your manufacturing potential with our state-of-the-art CNC machine shop
• Quality craftsmanship and superior precision for your machining needs

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a CNC shop business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in CNC shops for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in CNC shops. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a CNC shop business include:

• CNC Machinist – handle CNC production
• Marketing Lead – create and implement marketing strategies
• General Manager – scheduling, accounting

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Start Making Money!

CNC machines offer a world of possibilities, and can produce products or parts of all kinds. The CNC machine industry is large and growing, so it could be the perfect time to start your own CNC shop. It’s an opportunity to make a great living, and grow your business over time.

You’ve got the knowledge you need, so now its time to set up shop and get on the road to success!